You have fallen behind on your bill payments, and now your employer has received a court order to withhold money from your paycheck.  Those withheld funds are to be submitted as repayment of your outstanding debt to your creditors or collection agencies.  This process – otherwise known as a wage garnishment or wage attachment – can strain your already strained finances beyond your breaking point.  You feel lost, beaten and wrack your brain to figure out how to make ends meet now.  But you still have rights and may be able to find a way of reducing or even stopping the garnishment.

When are Wages Garnished?

Generally, your creditors will not resort to garnishing your wages as a first step if you fall behind on a payment or two.  It is only after other collection efforts have failed, or possibly your debt is approaching the end of the period when debt collection is enforceable, that your creditor could come to believe a wage garnishment is their best option.

If the debt is a secured loan, such as for a vehicle or mortgage, the creditor may first foreclose or repossess your property and sell it to recover their money.  If the sale price of the property does not cover the debt, a creditor may then attempt to garnish your wages to repay the remaining debt.

To garnish your wages, your creditor must first sue you to obtain a court judgement.  The court judgement will state the amount owed to the creditor and could include not only your original or remaining debt, but interest and fees as well.  The court order can then be used by the creditor to request that your employer withhold a portion of your salary to pay the debt.

Alternatively, there are some instances where the repayment of unpaid debt can be enforced without a court order being in effect.  Unpaid student loans, back taxes, alimony, or child support can lead to an Administrative Wage Garnishment (AWG) which does not require a court order.

You Have 6 options if Your Wages are Being Garnished

There are several ways to prevent your wages from being garnished, or to reduce the amount taken.  However, before you begin, it is a good idea to consult an attorney with a deeper understanding of consumer rights and laws.  If you are unsure where to start, the Legal Services Corporation can help you to locate low-cost and free legal assistance.

1. You Can Try to Work Out a Deal with the Creditor

One of the first steps you can take is to try and work with the creditor that wants to garnish your wages.  You may be able to negotiate a smaller monthly payment than the amount that would be taken from your paycheck.  Better yet, you might be able to negotiate a settlement, and wipe out the debt completely with a lump-sum payment.

2. File a Claim of Exemption

Based on your personal and financial situation, you might be able to file a claim of exemption to stop or decrease the wage garnishment.  For example, many states offer a head-of-household exemption for debtors who have a dependent, such as an elderly parent or child, that they financially support.

3. Challenge the Garnishment

You may have grounds to challenge the wage garnishment, such as when more than the appropriate amount of money is being withheld or if the creditor did not follow the correct procedure.

Review the documents sent to you by the court or your employer to make sure that you actually owe the debt.  If the creditor is attempting to collect a debt that is not owed, such as one you have already paid, or was discharged thorough bankruptcy, that could be grounds for stopping the garnishment and clearing the debt.

4. Consolidate or Refinance Your Debt

Debt consolidation or refinancing involves obtaining a new loan to settle your existing loans.  It will be difficult to qualify for a new loan if you are so far behind in your payments that your wages have been garnished, but it may be possible.

You may be able to qualify for a secured loan, such as a home equity loan or a home equity line of credit.  However, since you risk losing your home if you are unable to repay the debt this is not necessarily the best option, but using the funds to pay your creditor could stop the garnishment.

5. Work With a Credit Counselor to Get on a Payment Plan

A nonprofit credit counseling agency, like Money Management International might be able to negotiate with your creditor on your behalf.  The counseling organization may be able to negotiate a more manageable payment plan that is managed by the counseling agency rather than the creditor and the courts.

6. File Bankruptcy

Though it may seem extreme, sometimes filing for bankruptcy is the best option if you are buried under debt.  By filing for bankruptcy, you may be able to put an immediate stop to the wage garnishment and get the underlying debt discharged or restructured into a more manageable payment plan.  Working with a knowledgeable and experienced bankruptcy attorney can help you to determine if bankruptcy is a viable option for your situation.

Limitations on Wage Garnishment

There are federal limitations on the types of income that can be garnished as well as to how much money can be taken out.

Generally, the following are not to be touched:

• Social Security retirement, disability, and dependent/survivor’s benefits
• Supplement security income (SSI)
• Temporary Assistance for Needy Families (TANF)
• General Assistance
• SNAP (food stamps)
• Unemployment Insurance Benefits
• Veteran’s benefits
• Child support
• Alimony/maintenance

Other types of federal aid may also be exempt, and your state may have additional laws that protect certain forms of income.

For garnishable income, the amount that can be withheld can vary depending on the type of debt owed.  The limit will often be a percentage of your disposable income, which is the money you receive after taxes and your other legally required deductions are withheld from your paycheck.

• Most consumer debt: The lesser of 25% or the difference between your disposable income and $217.50, if paid weekly.  The figure of $217.50 is derived as a calculation of 30 times the federal minimum wage of $7.25 an hour.  If the minimum wage changes, this will change as well.
• Child support or alimony: Up to 60% (or, 50% if you have another child or spouse).  Your limit may increase by an additional 5% if you are over 12 weeks in arrears.
• Federal student loans: Up to 15% of your disposable income.
• Back taxes: Up to 15% of your disposable income.

Page three of this U.S. Department of Labor fact sheet has several examples you can read through to better understand how these limits work.  Keep in mind, these are only federal limits.  Your state laws may have stricter limits and may protect a larger portion of your pay.

Who can you turn to if you are in need of legal advice or assistance?

If you are a Virginia resident and currently under or facing a potential wage garnishment, do not hesitate – contact The Alliance Legal Group, PLLC.  Our team of knowledgeable and experienced attorneys is ready to help you understand your options and fight for you as you push forward to a new and brighter financial future.

Ready to get started?  Reach out today.  Call us at (757) 923-4357 or contact us online to schedule a FREE, no-obligation consultation.

 

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